SKS Microfinance Share, Down 18 Percent After Price Cut JPMorgan

Shares of city-based SKS Microfinance has fallen by nearly 18 percent Friday, touching a record low after JPMorgan cut the target for more than half the share, citing expected losses in the middle of the deterioration business model and the possible failure of capital.

India once thriving microfinance sector has been shaken since the State of Andhra Pradesh, which was its biggest market, a stop to debt collection practices in the sector who have been blamed for a wave of suicides by borrowers. Andhra Pradesh in October enacted rules against predatory collection practices by lenders to make loans that average about $ 150 to poor clients rate exceeded 30 percent, reports Reuters.

We believe that the state of Andhra Pradesh to see more losses in a model portfolio of business and weakened elsewhere, analysts at JPMorgan wrote in a report Friday.

We fear that the SKS might be more capital, the report said, referring to India's largest and the only one in the microfinance institution. India, rapidly growing, largely unregulated microfinance rose to prominence when SKS George Soros-backed companies raised $ 358,000,000 in initial public offering in August.

microfinance loans can be as low as 2,000 rupees (44 dollars) and can be used for various projects such as buying livestock or open a tea stall. The loans, which began to fund small businesses among the poor, has spread to consumers, allowing people to buy refrigerators or send their children to school.

SKS shares, where market values ​​of $ 674 million, fell 17.8 percent to a record low of 340 rupees after JPMorgan cut its price target to 200 rupees to 550 rupees actions.

The action was trading down 16.8 percent to 344 rupees in afternoon trade in a Mumbai market that rose 0.5 percent. On Friday, the SKS stock fell 77 per cent of their time in a coup in September, after its IPO.

JPMorgan said it expects SKS after a loss of Rs 700 crore this fiscal year due to writedowns related to its business in Andhra Pradesh, compared with a profit estimated revenue of Rs 170 million rupees in the last fiscal year.